Post on 16-Dec-2015
transcript
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Health Insurance Pricing for Non-Health Insurance
Actuaries
Jonathan N. Rubin, F.S.A.CAS 1999 Seminar on Ratemaking
March 11, 1999
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Agenda
• Introduction
• Health Insurance Products
• Managed Care Pricing Methods
• Current Topics
• Roles for Health Actuaries
• Questions
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Health Insurance Products
• Indemnity: Least managed
• Preferred Provider Organization (PPO)
• Point-of-Service (POS)
• Health Maintenance Organization (HMO): Highly managed
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Indemnity
• Provider Access: Any provider
• Medical Management: Possibly PAC/CSR
• Provider Compensation: Fee-for-service (Reasonable and Customary)
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PPO
• Provider Access: Any provider, with non-network at higher cost
• Medical Management: PAC/CSR and possibly some outpatient precertification; patient-driven
• Provider Compensation:
– In-network: Discounted fee-for-service, fee schedule (physician), per diems (hospital)
– Non-network: Fee-for-service (Reasonable and Customary)
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POS
• Provider Access: Any provider, with non-network at higher cost and in-network through PCP referral
• Medical Management: Referral process, prior authorization, case management, disease management; PCP-driven
• Provider Compensation:
– In-network: Discounted fee-for-service, fee schedule (physician), per diems/case rates (hospital), fixed fees (outpatient), capitation
– Non-network: Fee-for-service (Reasonable and Customary)
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HMO
• Provider Access: Network providers through PCP referral
• Medical Management: Referral process, prior authorization, case management, disease management; PCP-driven
• Provider Compensation: Discounted fee-for-service, fee schedule (physician), per diems/case rates (hospital), fixed fees (outpatient), capitation
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Health Insurance Products -- Funding Options
• Fully Insured/Guaranteed Cost: Maximum risk assumed; pooled vs. prospectively experience-rated
• Retroactively Experience-Rated: Dividend/deficit accounting
• Self-Funded (ASO): Minimum risk assumed
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Agenda
• Introduction
• Health Insurance Products
• Managed Care Pricing Methods
• Current Topics
• Roles for Health Actuaries
• Questions
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Managed Care Pricing -- Where Do We Start?
• In its simplest form, Pricing is based on expected future costs
• To understand the pricing process, we need to begin with determining the cost structure by product for each geographic market (community medical costs)
• Community medical costs, per member per month (PMPM), are adjusted by medical cost trend assumptions
• Community Rate is the required revenue to achieve target profit based on trended community medical costs and assumed administrative expenses
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Managed Care Pricing Methods
• Community Rating (CR): Rates established by category of business and geographic area and do not vary by account within these classifications
• Community Rating By Class (CRC): Community rates adjusted by age/sex of eligible employees or members and employer industry
• Adjusted Community Rating (ACR): Community or CRC rates adjusted to reflect actual past claims experience of a specific employer group
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CRC Rating -- Case-Level Inputs
• Census data (employees or members) by age/sex and by geographic area
• Benefit plan selections
• Industry (SIC) Code
• Tier rating adjustments
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What is a CRC Rate?
Trended Community Medical Cost PMPM for Benefit Plan
x Demographic Adjustment Factor
x Area Factor
x Industry Factor
= Expected CRC Medical Costs PMPM
+ Profit, Administrative Load, Commissions, Taxes
= CRC Required Revenue PMPM
==> Tier Rates to Single, 2-Party, Family
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CRC Rate Tiering
• Changing the rate steps may be neutral to revenue, but it can have major implications due to:
– Changes in participation or employer census
– Slice situation against competitors
• Consider all potential impacts when calculating tier factors
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Adjusted Community Rating (ACR)
Adjusted CommunityRate (ACR)
ACR: Represents an account’s required revenue/rates based on CRC, adjusted for credibilized account-level experience
credibility formula
Manual Rate or “CRC”
Community
CaseExperience
Customer
xexperience factor
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Agenda
• Introduction
• Health Insurance Products
• Managed Care Pricing Methods
• Current Topics
• Roles for Health Actuaries
• Questions
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Current Topics
• Forecasting Medical Cost Trend
• Consumer Trends
• Legislative Initiatives
• Provider Issues
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Medical Cost Forecasting
• Start with complete picture of historical medical costs
– Total cost, broken down by utilization and cost per service by service category
– Normalize for shock claims and book-of-business changes
• Provide range of forecasts
– Contracting and medical cost management initiatives
– Consider global economic, provider, and legislative impacts
• ==> “Managed Care” pricing
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Medical Cost Forecasting
Historical Data
Medical Mgmt. Initiatives
Contracting Initiatives
Legislation
Providers
Book of Business
Medical:
Medical/Contracting
Progress
Benchmarks
Pricing:
Trends
Risk Exposure
Forecasting Model
<==Link==>
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Consumer Trends
• Employee Choice/Slice
– Enrollment Prediction
– Underwriting/Selection
– Benefit Strategy
• Open Access
– Value of Referral Process/Benefit Changes
– Provider Contracting Implications
• Prescription Drug Formulary
– Cost of Open vs. Closed
– “3-Tier” Plan Designs
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Legislative Initiatives
• Federal vs. State
• Small Employer Reform
• Mandated Benefits/Coverages
• Mandatory Point-of-Service
• “Any Willing” Provider
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Provider Issues
• Consolidation
• Financial Sophistication
• Capitation/Assumption of Risk
– Percent-of-Premium
– Financial Underwriting
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Agenda
• Introduction
• Health Insurance Products
• Managed Care Pricing Methods
• Current Topics
• Roles for Health Actuaries
• Questions
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Roles for Health Actuaries
• Pricing
• Underwriting/Risk Assessment
• Reserving
• Medical Economics
• Provider Contracting
• Benefits Consulting
• Government